P4-2A The adjusted trial balance columns of the worksheet for Porter Company -ANSWER KEY

P4-2A The adjusted trial balance columns of the worksheet for Porter Company are as follows.

PORTER COMPANY

Worksheet

For the Year Ended December 31, 2008

Adjusted

Account Trial Balance

No. Account Titles Dr. Cr.

101 Cash 18,800

112 Accounts Receivable 16,200

126 Supplies 2,300


Instructions

(a) Complete the worksheet by extending the balances to the financial statement columns.

(b) Prepare an income statement, a retained earnings statement, and a classified balance sheet.

$10,000 of the notes payable become due in 2009. No additional issuance of common stock

occurred during 2008.

(c) Prepare the closing entries. Use J14 for the journal page.

(d) Post the closing entries. Use the three-column form of account. Income Summary is account

No. 350.

(e) Prepare a post-closing trial balance.

Adjusted

Account Trial Balance

No. Account Titles Dr. Cr.

130 Prepaid Insurance 4,400

151 Office Equipment 44,000

152 Accumulated Depreciation—Office Equipment 20,000

200 Notes Payable 20,000

201 Accounts Payable 8,000

212 Salaries Payable 2,600

230 Interest Payable 1,000

311 Common Stock 30,000

320 Retained Earnings 6,000

332 Dividends 12,000

400 Service Revenue 77,800

610 Advertising Expense 12,000

631 Supplies Expense 3,700

711 Depreciation Expense 8,000

722 Insurance Expense 4,000

726 Salaries Expense 39,000

905 Interest Expense 1,000

Totals 165,400 165,400

Here's the SOLUTION

BE 4-4 The ledger of Swann Company contains the following balances-ANSWER KEY

BE 4-4 The ledger of Swann Company contains the following balances: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. Prepare the closing entries at December 31.

: Retained Earnings $30,000; Dividends $2,000; Service Revenue $50,000; Salaries Expense $27,000; and Supplies Expense $4,000. Prepare the closing entries at December 31.

Here's the SOLUTION

BE 4-2 The ledger of Ley Company includes the following unadjusted-ANSWER KEY

BE 4-2 The ledger of Ley Company includes the following unadjusted balances: Prepaid Insurance $3,000, Service Revenue $58,000, and Salaries Expense $25,000. Adjusting entries are required for (a) expired insurance $1,200; (b) services provided $1,100, but unbilled and uncollected; and (c) accrued salaries payable $800. Enter the unadjusted balances and adjustments into a worksheet and complete the worksheet for all accounts. Note:You will need to add the following accounts: Accounts Receivable, Salaries Payable, and Insurance Expense.

Here's the SOLUTION

5-14A.(Solving for PMT in an annuity) To pay for your child’s education-ANSWER KEY

5-14A.(Solving for PMT in an annuity) To pay for your child’s education, you wish to have accumulated $15,000 at the end of 15 years. To do this, you plan to deposit an equal amount into the bank at the end of each year. If the bank is willing to pay 6 percent compounded annually, how much must you deposit each year to obtain your goal?

Here's the SOLUTION

Problem 5-6A (a-d) Kristen Montana operates a retail clothing operation-ANSWER KEY

Problem 5-6A (a-d) Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2005, 2006, 2007, and 2008. 2005 2006 2007 2008 Inventory (ending) $13,000 $11,300 $14,700 $12,200 Accounts payable (ending) 20,000 Sales 225,700 227,600 219,500 Purchase of merchandise inventory on account 146,000 145,000 129,000 Cash payments to suppliers 135,000 161,000 127,000

Here's the SOLUTION

EXERCISE 4-11 Selected accounts for Nina's Salon are presented below-ANSWER KEY

EXERCISE 4-11 Selected accounts for Nina's Salon are presented below. All June 30 postings are from closing entries. Salaries Expense Service Revenue 6/10 3,200 6/30 8,800 6/30 15,100 6/15 6,700 6/28 5,600 6/24 8,400 Retained Earnings Supplies Expense 6/30 2,500 6/1 12,000 6/12 600 6/30 1,300 6/30 2,000 6/24 700 Bal. 11,500 Rent Expense Dividends 6/1 3,000 6/30 3,000 6/13 1,000 6/30 2,500 6/25 1,500 Instructions (a) Prepare the closing entries that were made. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.) Description/Account Debit Credit Rent ExpenseSalaries ExpenseRetained EarningsDividendsService RevenueSupplies ExpenseIncome Summary Salaries ExpenseIncome SummarySupplies ExpenseRent ExpenseRetained EarningsDividendsService Revenue (To close revenue.) Supplies ExpenseDividendsRent ExpenseRetained EarningsIncome SummaryService RevenueSalaries Expense Income SummaryRetained EarningsSupplies ExpenseDividendsRent ExpenseSalaries ExpenseService Revenue DividendsRetained EarningsRent ExpenseService RevenueIncome SummarySalaries ExpenseSupplies Expense Service RevenueDividendsSalaries ExpenseRent ExpenseRetained EarningsSupplies ExpenseIncome Summary (To close expenses.) Supplies ExpenseDividendsRetained EarningsIncome SummaryService RevenueRent ExpenseSalaries Expense Salaries ExpenseService RevenueDividendsRetained EarningsIncome SummaryRent ExpenseSupplies Expense (To close net income to retained earnings.) DividendsService RevenueIncome SummarySalaries ExpenseRetained EarningsRent ExpenseSupplies Expense Rent ExpenseIncome SummarySalaries ExpenseRetained EarningsSupplies ExpenseDividendsService Revenue (To close dividends to capital.) (b) Post the closing entries to Income Summary. Income Summary June 30 June 30 June 30 2,000 Copyright © 2000-2011 by John Wiley & Sons, Inc. or related companies. All rights reserved.

Here's the SOLUTION

Exercise 5-8 Presented is information related to Rogers Co. -ANSWER KEY

Exercise 5-8 Presented is information related to Rogers Co. for the month of January 2008. Ending inventory per perpetual records $21,600 Ending inventory actually on hand 21,000 Cost of goods sold 218,000 Freight-out 7,000 Insurance expense 12,000 Rent expense 20,000 Salary Expense 61,000 Sales Discounts 10,000 Sales Returns and Allowances 13,000 Sales 350,000

Here's the SOLUTION

Exercise 5-11 Airport Connection provides shuttle service between four hotels near a medical center-ANSWER KEY

Exercise 5-11 Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10 passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below.

  Fare revenues (1,440 fares) $36,000

  Variable costs   

      Fuel $5,040

      Tolls and Parking 3,100

      Maintenance 500 8,640

  Contribution margin 27,360

  Fixed costs  

      Salaries  13,000

      Depreciation 1,300

      Insurance 1,128 15,428

Net Income 11932

Instructions

Calculate the break- even point in (1) dollars and (2) number of fares.

Without calculations, determine the contribution margin at the break-even point.

Here's the SOLUTION

Exercise 5-2 kozy enterprise is considering manufacturing a new product-ANSWER KEY

Exercise 5-2 kozy enterprise is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output shown below. Output in Units Rent Expense Direct Materials 1000 $5000 $4000 2000 5000 6000 3000 5000 7800 4000 7000 8000 5000 7000 10000 6000 7000 12000 7000 7000 14000 8000 7000 16000 9000 7000 18000 10000 10000 23000 11000 10000 28000 12000 10000 36000

Here's the SOLUTION

P6-5A You are provided with the following information for Pavey Inc.-ANSWER KEY

P6-5A You are provided with the following information for Pavey Inc. for the month ended October 31, 2008. Pavey uses a periodic method for inventory. Date Description Units Unit Cost or Selling Price October 1 Beginning inventory 60 $25 October 9 Purchase 120 26 October 11 Sale 100 35 October 17 Purchase 70 27 October 22 Sale 60 40 October 25 Purchase 80 28 October 29 Sale 110 40

Here's the SOLUTION

Exercise 21-4 Douglas Manufacturing Company has two production-ANSWER KEY

Exercise 21-4 Douglas Manufacturing Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process-Cutting $2,900, Work in Process-Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred.

Here's the SOLUTION

Exercise 8-9A Events related to the acquisition use, and disposal-ANSWER KEY

Fundamental Financial Accounting Concepts 7th Edition. Edmonds, McNair, Olds

Exercise 8-9A Events related to the acquisition use, and disposal of a tangible plant asset: straight line depreciation CJ’s Pizza purchased a delivery van on January 1, 2011 for $25,000. In addition, CJ’s paid sales tax and title fees of $1,000 for the van. The van is expected to have a four year life and a salvage value of $6,000.

Required:

A. Using the straight line method, compute the depreciation expense for 2011 and 2012.

B. Prepare the general journal entry to record the 2011 depreciation.

C. Assume the van was sold on January 1, 2014 for $12,000. Prepare the journal entry for the sale of the van in 2014.

Here's the SOLUTION

Problem 8-34A- Accounting for intangible assets Mia-Tora Company purchased-ANSWER KEY

Fundamental Financial Accounting Concepts 7th Edition. Edmonds, McNair, Olds

Problem 8-34A Accounting for intangible assets Mia-Tora Company purchased a fast food restaurant for $1,400,000. The fair market values of the assets purchased were as follows. No liabilities were assumed. Equipment $320,000 Land $200,000 Building $650,000 Franchise $100,000

Required:

a. Calculate the amount of goodwill purchased.

b. Prepare the journal entry to record the amortization of the franchise fee at the end of year 1.

Here's the SOLUTION

Exercise 7-13A Effect of credit card sales on financial statements Royal Carpet cleaning-ANSWER KEY

Fundamental Financial Accounting Concepts 7th Edition. Edmonds, McNair, Olds

Exercise 7-13A Effect of credit card sales on financial statements Royal Carpet cleaning provided $90,000 of services during 2011, its first year of operation. All customers paid for the services with major credit cards. Royal submitted the credit card receipts to the credit card company immediately. The credit card company paid Royal cash in the amount of face value less a 3 percent service charge.

Required:

A. Record the credit card sales and the subsequent collection of accounts reeivable in a horizontal statements model like the one shown here. In the cash flow xolumn, indicate whether the item is an operating activity, investing activity, or financing activity. Use NA to indicate that an element is not affected by the event.

Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash flow

Cash + Accts. Rec.

B. Answer the following questions:

(1) What is the amount of total assets at the end of the accounting period?

(2) What is the amount of revenue reported on the income statement?

(3) What is the amount of cash flow from operating activities reported on the statement of cash flows? (4) Why would Royal Carpet Cleaning accept credit cards instead of providing credit directly to its customers? In other words, why would Royal be willing to pay 3 percent of sales to have the credit card company handle its sales on account?

Here's the SOLUTION

P12-5A The ledger of Nakona Corporation at December 31, 2008-ANSWER KEY

P12-5A The ledger of Nakona Corporation at December 31, 2008, after the books have been closed, contains the following stockholders’ equity accounts.
Preferred Stock (10,000 shares issued) $1,000,000
Common Stock (400,000 shares issued) 2,000,000
Paid-in Capital in Excess of Par Value—Preferred 200,000
Paid-in Capital in Excess of Stated Value—Common 1,100,000
Common Stock Dividends Distributable 200,000
Retained Earnings 2,365,000
A review of the accounting records reveals the following.
1. No errors have been made in recording 2008 transactions or in preparing the closing entry for net income.
2. Preferred stock is 8%, $100 par value, noncumulative, and callable at $125. Since January 1, 2007, 10,000 shares have been outstanding; 20,000 shares are authorized.
3. Common stock is no-par with a stated value of $5 per share; 600,000 shares are authorized.
4. The January 1 balance in Retained Earnings was $2,450,000.
5. On October 1, 100,000 shares of common stock were sold for cash at $8 per share.
6. A cash dividend of $600,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 2007.
7. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $7.
8. Net income for the year was $795,000.
9. On December 31, 2008, the directors authorized disclosure of a $100,000 restriction of retained earnings for plant expansion. (Use Note A.)

Instructions
(a) Reproduce the Retained Earnings account (T-account) for the year.
(b) Prepare a retained earnings statement for the year
(c) Prepare a stockholders’ equity section at December 31.
(d) Compute the earnings per share of common stock using 325,000 as the weighted average shares outstanding for the year.
(e) Compute the allocation of the cash dividend to preferred and common stock.

Here's the SOLUTION

P12-4A On January 1, 2008, Galactica Corporation had the following stockholders’ equity accounts-ANSWER KEY

P12-4A On January 1, 2008, Galactica Corporation had the following stockholders’ equity accounts.

Common Stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000Paid-in Capital in Excess of Par Value 200,000

Retained Earnings 500,000

During the year, the following transactions occurred.

Feb. 1 Declared a $1 cash dividend per share to stockholders of record on February 15,

payable March 1.

Mar. 1 Paid the dividend declared in February.

Apr. 1 Announced a 5-for-1 stock split. Prior to the split, the market price per share was $35.

July 1 Declared a 5% stock dividend to stockholders of record on July 15, distributable July

31. On July 1, the market price of the stock was $7 per share.

July 31 Issued the shares for the stock dividend.

Dec. 1 Declared a $0.50 per share dividend to stockholders of record on December 15,

payable January 5, 2009.

31 Determined that net income for the year was $380,000.

Instructions

(a) Journalize the transactions and closing entries.

(b) Enter the beginning balances and post the entries to the stockholders’ equity accounts.

(Note: Open additional stockholders’ equity accounts as needed.)

(c) Prepare a stockholders’ equity section at December 31.

Here's the SOLUTION

E12-3 Vorteck Inc. manufactures snowsuits-ANSWER KEY

E12-3 Vorteck Inc. manufactures snowsuits. Vorteck is considering purchasing a new sewing machine at a cost of $2.5 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Vorteck spent $55,000 to keep it operational. The existing sewing machine can be sold today for $260,000. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $390,000 2 400,000 3 411,000 4 426,000 5 434,000 6 435,000 7 436,000 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,000. This new equipment would require maintenance costs of $95,000 at the end of the fifth year. The cost of capital is 9%. Instructions Calculate the net present value. (If net present value is negative enter with either a (-) sign preceding the number or (parenthesis) around the number. Round computations and final answer for present value to 0 decimal places, e.g. 125. Round computations for Discount Factor to 5 decimal places.) $ Should Vorteck purchase the new machine to replace the existing machine?

Here's the SOLUTION

E12-2 Chris's Custom Manufacturing Company is considering three new projects-ANSWER KEY

E12-2 Chris's Custom Manufacturing Company is considering three new projects, each requiring an equipment investment of $21,000. Each project will last for 3 years and produce the following net annual cash flows. Year AA BB CC 1 $7,000 $9,500 $13,000 2 9,000 9,500 10,000 3 15,000 9,500 11,000 Total $31,000 $28,500 $34,000 The equipment's salvage value is zero, and Chris uses straight-line depreciation. Chris will not accept any project with a cash payback period over 2 years. Chris's required rate of return is 12%. Compute each project's payback period, indicating the most desirable project and the least desirable project using this method. (Round answers to 2 decimals, e.g. 10.50, and assume in your computations that cash flows occur evenly throughout the year.) AA years BB years CC years The most desirable project based on payback period is . The least desirable project based on payback period is . Compute the net present value of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125. Round computations for Discount Factor to 5 decimal places.) AA $ BB $ CC $ The most desirable project based on net present value is . The least desirable project based on net present value is .

Here's the SOLUTION

E12-1 TMateo Corporation is considering purchasing a new delivery truck-ANSWER KEY

E12-1 TMateo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,000. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,000. At the end of 8 years the company will sell the truck for an estimated $28,000. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset's estimated useful life. Nathan Levitt, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%. Compute the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125. Round computations for Discount Factor to 5 decimal places.) Payback period years Net present value $ Does the project meet the company's cash payback criteria? Does it meet the net present value criteria for acceptance? Should the project be accepted? ype your homework question here, such as "Help me understand this chemistry problem..."

Here's the SOLUTION

Appendix C Problem C.1- E-Z Manufacturing Company is a partnership among yolanda gonzales-ANSWER KEY

APPENDIX C FORMS OF BUSINESS ORGANIZATIONS

Appendix C, Problem C.1, page C23

E-Z Manufacturing Company is a partnership among yolanda gonzales, willie todd and linda yeager. The partnership contract states that partnership profits will be split equally among the three partners during the current year gonzales withdrew $25,000, todd withdrew $23,000, and yeager withdrew $30,000. net income of e-z manufacturing company amounted to $180,000.

a. calculate each partner's share of net income for the period.

b. describe the effects, if any, that the partnership operations would have on the individual tax returns of the partners. Each partner in the partnership should report his or her share of the partnership net income ($60,000) in their individual personal income tax returns.

c. prepare a statement of partner's equity for the year. Assume that partner's capital accounts had a beginning balances of...

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Appendix C, Problem C.3- Guenther and Firmin, both of whom are CPAs, form a partnership-ANSWER KEY

APPENDIX C FORMS OF BUSINESS ORGANIZATIONS


Appendix C, Problem C.3, page C23

Guenther and Firmin, both of whom are CPAs, form a partnership, with Guenther investing $100,000 and Firmin, $80,000. They agree to share net income as follows: 1. Salary allowances of $80,000 to Guenther and $50,000 to Firmin. 2. Interest allowances at 15% of beginning capital account balances. 3. Any partnership earnings in excess of the amount required to cover the interest and salary allowances to be divided 60% to Guenther and 40% to Firmin. The partnership net income for the first year of operations amounted to $247,000 before interest and salary allowances. Show how this $247,000 should be divided between the two partners. Use a three-column schedule. List on separate lines the amounts of interest, salaries, and the residual amount divided.

Here's the SOLUTION

Appendix C, Problem C.9- The partnership of Avery and Kirk was formed on July 1-ANSWER KEY

APPENDIX C FORMS OF BUSINESS ORGANIZATIONS

Appendix C, Problem C.9, pages C25-C26

The partnership of Avery and Kirk was formed on July 1, when George Avery and Dinah Kirk agreed to invest equal amounts and to share profits and losses equally. The investment by Avery consists of $30,000 cash and an inventory of merchandise valued at $56,000. Kirk also is to contribute a total of $86,000. However, it is agreed that her contributions will consist of the transfer of both assets of her business and its liabilities (listed below). A list of the agreed values of the various items as well as their carrying values on Kirk's records follows. Kirk also contributes enough cash to bring her capital account to $86,000.

a. Draft entries (in general journal form) to record the investments of Avery and Kirk in the new partnership.

b. Prepare the beginning balance sheet of the partnership (in report form) at the close of business July 1, reflecting the above transfers to the firm.

c. On the following June 30 after one year of operation, the Income Summary account showed a credit balance of $74,000, and the Drawing account for each partner showed a debit balance of $31,000. Prepare journal entries to close the Income Summary account and the Drawing accounts at June 30.

Here's the SOLUTION

C6-37 What are the amount and character of the gain or loss-ANSWER KEY

C6-37 What are the amount and character of the gain or loss recognized by the distributing corporation when making liquidating distributions in the following situations? What is the shareholder’s basis for the property received? In any situation where a loss is disallowed, indicate what changes would be necessary to improve the tax consequences of the transaction. a. Best Corporation distributes land having a $200,000 FMV and a $90,000 adjusted basis to Tanya, its sole shareholder. The land, a capital asset, is subject to a $40,000 mortgage, which Tanya assumes. b. Wilkins Corporation distributes depreciable property to its two equal shareholders. Robert receives a milling machine having a $50,000 adjusted basis and a $75,000 FMV. The corporation claimed $30,000 depreciation on the machine. The corporation purchased the milling machine from an unrelated seller four years ago. Sharon receives an automobile that originally cost $40,000 two years earlier and has a $26,000 FMV. The corporation claimed $25,000 depreciation on the automobile. c. Jordan Corporation distributes marketable securities having a $100,000 FMV and a $175,000 adjusted basis to Brad, a 66.67% shareholder. Jordan purchased the marketable securities three years ago. Jordan distributes $50,000 cash to Ann, a 33.33% shareholder. d. Assume the same facts as in Part c except the securities and cash are instead each distributed two-thirds to Brad and one-third to Ann.

Here's the SOLUTION

C6-36 Len received a liquidating distribution of $500,000 cash-ANSWER KEY

C6-36 Len received a liquidating distribution of $500,000 cash (less federal income taxes owed on the liquidation by the corporation) and the assets that he had contributed, which now have a $100,000 adjusted basis and a $500,000 FMV. Assume a 34% corporate tax rate. a. What are the tax consequences of the corporate formation transaction? b. What are the tax consequences of the corporate liquidation transaction? c. Would your answers to Parts a and b remain the same if instead the assets had been contributed by Wallace Corporation to Ace Corporation? If not, explain how your answer(s) would change?

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C6-33 For seven years, Monaco Corporation has been owned entirely by Stacy-ANSWER KEY

C6-33 For seven years, Monaco Corporation has been owned entirely by Stacy and Monique, who are husband and wife. Stacy and Monique have a $165,000 basis in their jointly owned Monaco stock. The Monaco stock is Sec. 1244 stock. They receive the following assets in liquidation of their corporation: accounts receivable, $25,000 FMV; a car, $16,000 FMV; office furniture, $6,000 FMV; and $5,000 cash. a. What are the amount and character of their gain or loss? b. How would your answer change if the accounts receivable instead had a $140,000 FMV? c. What is the Monaco’s basis for each property received in the liquidation in Parts a and b? Len Wallace contributed assets with a$100,000 adjusted basis and a $400,000 FMV to Ace Corporation in exchange for all of its single class of stock. The corporation conducted operations for five years and was liquidated.

Here's the SOLUTION

Managerial Accounting E22-5 In the month of June, Barbara's Beauty Salon gave 2,700 haircuts-ANSWER KEY

Managerial Accounting

E22-5 (All requirements)

In the month of June, Barbara's Beauty Salon gave 2,700 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $18,000 and variable costs were 70% of sales.

Here's the SOLUTION

Managerial Accounting E22-10 Moran Company reports the following operating result (Alternatives to increase net income)-ANSWER KEY

Managerial Accounting

E22-10 Moran Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.

Here's the SOLUTION

Managerial Accounting- E22-8 NIU Company has the following information available (CVP Income Statements)-ANSWER KEY

Managerial Accounting

E22-8 NIU Company has the following information available for September 2010. Unit selling price of video game consoles Unit variable costs Tot al f ixed c osts Units sold Complete the CVP income statement that shows both total and per unit amounts.

Compute NIU's breakeven point in units.

Complete the CVP income statement for the breakeven point that shows both total and per unit amounts. (If answer is zero, please enter 0. Do not leave any fields blank.)

Here's the SOLUTION

E22-2 The controller of Dugan Industries has collected-ANSWER KEY

Managerial Accounting


E22-2 The controller of Dugan Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.

Month Total Maintenance Costs Total Machine Hours


Instructions:

a.Determine the fixed and variable cost components using the high-low method.

Here's the SOLUTION

Financial Management Chapter 13 P09 Build a Model - Bradford Services Inc (BSI)-ANSWER KEY

Financial Management: Theory and Practice

Chapter 13 Real Options

Spreadsheet Problem: Build a Model - Real Options

(In other book editions, it is Ch15 P10 Build a Model)

P13-9

Start with the partial model in the file FM12 Ch 13 P09 Build a Model.xls from the textbook’s Web site.

Bradford Services Inc. (BSI) is considering a project that has a cost of $10 million and an expected life of 3 years. There is a 30% probability of good conditions, in which case the project will provide a cash flow of $9 million at the end of each year for 3 years. There is a 40% probability of medium conditions, in which case the annual cash flows will be $4 million, and there is a 30% probability of bad conditions and a cash flow of _$1 million per year. BSI uses a 12% cost of capital to evaluate projects like this.

a. Find the project’s expected present value, NPV, and the coefficient of variation of the present value.

b. Now suppose that BSI can abandon the project at the end of the first year by selling it for $6 million. BSI will still receive the Year 1 cash flows, but will receive no cash flows in subsequent years.

c. Now assume that the project cannot be shut down. However, expertise gained by taking it on would lead to an opportunity at the end of Year 3 to undertake a venture that would have the same cost as the original project, and the new project’s cash flows would follow whichever branch resulted for the original project. In other words, there would be a second $10 million cost at the end of Year 3, and then cash flows of either $9 mil the following 3 years. Use decision tree analysis to estimate the value of theproject, including the opportunity to implement the new project at Year3. Assume the $10 million cost at Year 3 is known with certainty and should be discounted at the risk-free rate of 6%.

d. Now suppose the original (no abandonment and no additional growth) project could be delayed a year. All the cash flows would remain unchanged, but information obtained during that year would tell the company exactly which set of demand conditions existed. Use decision tree analysis to estimate the value of the project if it is delayed by 1 year. (Hint: Discount the $10 million cost at the risk-free rate of 6% since it is known with certainty.)

e. Go back to part c. Instead of using decision tree analysis, use the Black-Scholes model to estimate the value of the growth option. The risk-free rate is 6 percent, and the variance of the project's rate of return is 22 percent.

Here's the SOLUTION

Acc557 Strayer E2-10 Simon Landscaping Company--ANSWER KEY

E2-10 The T accounts below summarize the ledger of Simon Landscaping Company at the end of the first month of operations.

Cash

No. 101

4/1

15,000

4/15

600

4/12

900

4/25

1,500
4/29

400

4/30

1,000


Accounts Receivable

No. 112

4/7

3,200

4/29

400

Supplies

No. 126

4/4


1,800


Accounts Payable

No. 201

4/25

1,500

4/4

1,800


Unearned Revenue

No. 205

4/30

1,000


Common Stock

No. 311

4/1

15,000


Service Revenue

No. 400

4/7

3,200

4/12


900


Salaries Expense

No. 726

4/15

600


Instructions

(a) Prepare the complete general journal from which the postings to Cash were made.

(b) Prepare a trial balance at April 30, 2008. (If answer is zero, please enter 0. Do not leave any fields blank.)

Here's the SOLUTION

ACC280 E3-4 Emeril Corporation (Accrual or prepayment)--ANSWER KEY

Acc280 Financial Accounting

(Acc557 Strayer)

Chapter 3 Adjusting the Accounts




Exercise 3-4


Emeril Corporation encounters the following situations:



Instructions

Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense, accrued revenue) is needed in each situation, at December 31, 2008.


1. Emeril collects $1,000 from a customer in 2008 for services to be performed in 2009.

2. Emeril incurs utility expense which is not yet paid in cash or recorded.

3. Emeril's employees worked 3 days in 2008, but will not be paid until 2009.

4. Emeril earned service revenue but has not yet received cash or recorded the transaction.

5. Emeril paid $2,000 rent on December 1 for the 4 months starting December 1.

6. Emeril received cash for future services and recorded a liability until the revenue was earned.

7. Emeril performed consulting services for a client in December 2008. On December 31, it billed the client $1,200.

8. Emeril paid cash for an expense and recorded an asset until the item was used up.

9. Emeril purchased $900 of supplies in 2008; at year-end, $400 of supplies remain unused.

10. Emeril purchased equipment on January 1, 2008; the equipment will be used for 5 years.

11. Emeril borrowed $10,000 on October 1, 2008, signing an 8% one-year note payable.

Here's the SOLUTION

E3-10 The income statement of Benning Co. for the month of July-ANSWER KEY

Acc280 Financial Accounting or Acc557 Strayer

Chapter 3 Adjusting the Accounts

E3-10

The income statement of Benning Co. for the month of July shows net income of $1,400 based on Service Revenue $5,500, Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $600. In reviewing the statement, you discover the following.

1. Insurance expired during July of $400 was omitted.

2. Supplies expense includes $200 of supplies that are still on hand at July 31.

3. Depreciation on equipment of $150 was omitted.

4. Accrued but unpaid wages at July 31 of $300 were not included.

5. Services provided but unrecorded totaled $500.

Instructions

Prepare a correct income statement for July 2008. (List amounts from largest to smallest eg 10, 5, 3, 2. Enter all amounts as positive amounts and subtract where necessary.)

Here's the SOLUTION

ACC/100 Week 3 E5-10 In its income statement for the year ended December 31, 2012, Fox Company-ANSWER KEY

Acc100 Week 3

E5-10, Prepare multiple-step and single-step income statements.

In its income statement for the year ended December 31, 2012, Fox Company reported the following condensed data. Operating expenses $725,000 Interest revenue 28,000 Cost of goods sold 1,289,000 Loss on sale of plant assets 17,000 Interest expense 70,000 Net sales 2,200,000

Instructions:

(a) Prepare a multiple-step income statement.

(b) Prepare a single-step income statement.

Here's the SOLUTION

ACC/421 P23-8 Comparative balance sheet accounts of Jensen Company (Direct and Indirect Cash Flow)-ANSWER KEY

ACC421 Intermediate Accounting

P23-8 (SCF - Direct and Indirect Methods)

Comparative balance sheet accounts of Jensen Company are presented below.

JENSEN COMPANY
COMPARATIVE BALANCE SHEET ACCOUNTS
DECEMBER 31,
Debit Balances 2007 2006
Cash $80,000 $51,000
Accounts receivable 145,000 130,000
Merchandise inventory 75,000 61,000
Investments
(Available-for-sale) 55,000 85,000
Equipment 70,000 48,000
Buildings 145,000 145,000
Land 40,000 25,000
Totals $610,000 $545,000
Credit Balances
Allowance for Doubtful Accounts $10,000 $8,000
Accumulated Depreciation - Equipment 21,000 14,000
Accumulated Depreciation - Building 37,000 28,000
Accounts payable 70,000 60,000
Income taxes payable 12,000 10,000
Long-term notes payable 62,000 70,000
Common stock 310,000 260,000
Retained earnings 88,000 95,000
Totals $610,000 $545,000

Additional data:

1. Equipment that cost $10,000 and was 40% depreciated was sold in 2007.
2. Cash dividends were declared and paid during the year.
3. Common stock was issued in exchange for land.
4. Investments that cost $35,000 were sold during the year.

Jensen's 2007 income statement is as follows.

Sales $950,000
Less: Cost of goods sold 600,000
Gross profit 350,000
Less: Operating expenses (includes deprecation and bad debt expense)
250,000
Income from operations 100,000
Other revenues and expenses
Gain on sale of investments $15,000
Loss on sale of equipment (3,000) 12,000
Income before taxes 112,000
Income taxes 45,000
Net income $67,000

Instructions

a. Compute net cash provided by operating activities under the direct method.
b. Prepare a statement of cash flows using the indirect method.

Here's the SOLUTION

ACC/421 Intermediate Accounting- P23-7 George Winston Company, a major retailer of bicycles-ANSWER KEY

ACC 421 Intermediate Financial Accounting I

Weygandt, Kieso, Warfield

Week Five (Week 5)

Problem 23-7 SCF—Direct and Indirect Methods from Comparative Financial Statements

George Winston Company, a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The comparative statement of financial position and income statement for Winston as of May 31, 2008, are shown on the next page. The company is preparing its statement of cash flows.

......

The following is additional information concerning Winston’s transactions during the year ended

May 31, 2008.

1. All sales during the year were made on account.

2. All merchandise was purchased on account, comprising the total accounts payable account.

3. Plant assets costing $98,000 were purchased by paying $48,000 in cash and issuing 5,000 shares of stock.

4. The “other expenses” are related to prepaid items.

5. All income taxes incurred during the year were paid during the year.

6. In order to supplement its cash, Winston issued 4,000 shares of common stock at par value.

7. There were no penalties assessed for the retirement of bonds.

8. Cash dividends of $105,000 were declared and paid at the end of the fiscal year.

Instructions

(a) Compare and contrast the direct method and the indirect method for reporting cash flows from operating activities.

(b) Prepare a statement of cash flows for Winston Company for the year ended May 31, 2008, using the direct method. Be sure to support the statement with appropriate calculations. (A reconciliation of net income to net cash provided is not required.)

(c) Using the indirect method, calculate only the net cash flow from operating activities for Winston Company for the year ended May 31, 2008.

Here's the SOLUTION

ACC/421 Intermediate Accounting- E6-5 Computatin of present value-FROM ANSWER KEY

Acc421 Intermediate Accounting

Chapter 6 Time Value of Money



E6-5 Computation of Present Value



Using the appropriate interest table, compute the present values of the following periodic amounts due at the end of the designated periods.


(a) $30,000 receivable at the end of each period for 8 periods compounded at 12%.

(b) $30,000 payments to be made at the end of each period for 16 periods at 9%.

(c) $30,000 payable at the end of the seventh, eighth, ninth, and tenth periods at 12%.

Here's the SOLUTION

ACC421 Intermediate Accounting- E6-10 (time value-unknown periods and interest rate)

Acc421 Intermediate Accounting

Chapter 6 Time Value of Money

E6-10 Unknown Periods and Unknown Interest Rate

Consider the following independent situations.

(a) Mike Finley wishes to become a millionaire. His money market fund has a balance of $92,296 and has a guaranteed interest rate of 10%. How many years must Mike leave that balance in the fund in order to get his desired $1,000,000?

(b) Assume that Serena Williams desires to accumulate $1 million in 15 years using her money market fund balance of $182,696. At what interest rate must Serena’s investment compound annually?

Here's the SOLUTION

Accounting Principles- E3-10 The income statement of Brandon Co. for the month of July shows net income-ANSWER KEY

Accounting Principles, Tenth Edition by Weygandt, Kieso, and Kimmel

E3-10, Prepare correct income statement.
The income statement of Brandon Co. for the month of July shows net income of $1,400 based on
Service Revenue $5,500 Supplies Expense $1,200
Salaries and Wages Expense $2,300 Utilities Expense $600
In reviewing the statement, you discover the following:
1. Insurance expired during July of $400 was omitted.
2. Supplies expense includes $250 of supplies that are still on hand at July 31.
3. Depreciation on equipment of $150 was omitted.
4. Accrued but unpaid salaries and wages at July 31 of $300 were not included.
5. Services provided but unrecorded totaled $650

Instructions:
Prepare a correct income statement for July 2012.

Here's the SOLUTION

Accounting Principles- P4-1A Omer Asik began operations as a private investigator on January 1, 2012-ANSWER KEY

Accounting Principles, Tenth Edition by Weygandt, Kieso, and Kimmel

P4-1A, Prepare worksheet, financial statements, and adjusting and closing entries.
Omer Asik began operations as a private investigator on January 1, 2012. The trial balance columns of the worksheet for Omer Asik, P.I. at March 31 are as follows.

OMER ASIK, P.I.

Worksheet

For the Quarter Ended March 31, 2012
Trial Balance
Account titles Dr. Cr.
Cash 11,400
Accounts Receivable 5,620
Supplies 1,050
Prepaid Insurance 2,400
Equipment 30,000
Notes Payable 10,000
Accounts Payable 12,350
Owner's Capital 20,000
Owner's Drawings 600
Service Revenue 13,620
Salaries and Wages Expense 2,200
Travel Expense 1,300
Rent Expense 1,200
Miscellaneous Expense 200
55,970 55,970
Supplies Expense
Depreciation Expense
Accumulated Depreciation - Equipment
Interest Expense
Interest Payable
Insurance Expense
Totals
Net Income
Totals

Other data:
1. Supplies on hand total $480
2. Depreciation per quarter is $800
3. Interest accrued on 6-month note payable, issued January 1, $300
4. Insurance expires at the rate of $200 per month.
5. Services provided but unbilled at March 31 total $1,030

Instructions:
(a) Complete the worksheet, above.
(b) Prepare an income statement and owner’s equity statement for the quarter and a classified balance sheet at March 31. O. Asik did not make any additional investments in the business during the quarter ended March 31, 2012.

Here's the SOLUTION

Accounting Principles- P5-1A O’Quinn Co. distributes suitcases to retail stores and extends credit terms-ANSWER KEY

Accounting Principles, Tenth Edition by Weygandt, Kieso, and Kimmel

P5-1A, Journalize purchase and sales transactions under a perpetual inventory system.
O’Quinn Co. distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of June, O’Quinn’s inventory consisted of suitcases costing $1,200 During the month of July, the following merchandising transactions occurred.

July 1 Purchased suitcases on account for $1,800 from Emerson Manufacturers, FOB destination, terms
2/10, n/30. The appropriate party also made a cash payment of $100 for freight on this date.
July 3 Sold suitcases on account to Straume Satchels for $2,000 The cost of suitcases sold is
$1,200
July 9 Paid Emerson Manufacturers in full.
July 12 Received payment in full from Straume Satchels.
July 17 Sold suitcases on account to The Going Concern for $1,800 The cost of the suitcases sold was
$1,080
July 18 Purchased suitcases on account for $1,900 from Hume Manufacturers, FOB shipping point,
terms 1/10, n/30. The appropriate party also made a cash payment of $125 for freight
on this date.
July 20 Received $300 credit (including freight) for suitcases returned to Hume Manufacturers.
July 21 Received payment in full from The Going Concern.
July 22 Sold suitcases on account to Desmond’s for $2,250 The cost of suitcases sold is
$1,350
July 30 Paid Hume Manufacturers in full.
July 31 Granted Desmond’s $200 credit for suitcases returned costing $120

Sansomite's chart of accounts includes the following:
101 Cash 401 Sales Revenue
112 Accounts Receivable 412 Sales Returns and Allowances
120 Inventory 414 Sales Discounts
201 Accounts Payable 505 Cost of Goods Sold

Instructions:
Journalize the transactions for the month of July for O’Quinn using a perpetual inventory system.

Here's the SOLUTION

Accounting Principles- P6-2A Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis-ANSWER KEYP6-2A

Accounting Principles, Tenth Edition by Weygandt, Kieso, and Kimmel


P6-2A, Determine cost of goods sold and ending inventory using FIFO, LIFO, and average-cost with analysis.

Kyoto Distribution markets CDs of the performing artist A. A. Bondy. At the beginning of March,
Kyoto had in beginning inventory 1,500 Bondy CDs with a unit cost of $7
During March Kyoto made the following purchases of Bondy CDs.
Date: Quantity: Cost: Date: Quantity: Cost:
Mar 5 3,000 $8 Mar 21 4,000 $10
Mar 13 5,500 $9 Mar 26 2,000 $11
During March 12,500 units were sold. Kyoto uses a periodic inventory system.

Instructions:
(a) Determine the cost of goods available for sale.

COST OF GOODS AVAILABLE FOR SALE
Date Explanation Units Unit Cost Total Cost
Mar 1 Text Number Value Formula
Mar 5 Text Number Value Formula
Mar 13 Text Number Value Formula
Mar 21 Text Number Value Formula
Mar 26 Text Number Value Formula
Total Formula Formula

(b) Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods.


(c) Which cost fl ow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

Here's the SOLUTION

The Carter Company's bonds mature in 10 years have a par value (TESTBANK)

1.
The Carter Company's bonds mature in 10 years have a par value of $1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds?
(Points: 4)
$935.82
$941.51
$958.15
$964.41
$979.53


2. Ken Williams Ventures' recently issued bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 8%, at what price should the bonds sell? (Points: 4)
$801.80
$814.74
$828.81
$830.53
$847.86



3.
Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are currently yielding 7.8%, then at what rate should Rollincoast expect to issue new bonds?
(Points: 4)
7.8%
8.7%
9.2%
10.2%
12.9%


4.
A 10-year, $1,000 face value bond has an 8.5% annual coupon. The bond has a current yield of 8%. What is the bond’s yield to maturity?

(Points: 4)
8.25%
8.86%
7.59%
8.50%
8.00%


5. You wish to purchase a 20-year, $1,000 face value bond that makes semiannual interest payments of $40. If you require a 10% nominal yield to maturity, what price should you be willing to pay for the bond? (Points: 4)
$619
$674
$761
$828
$902


6.
Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease by 1%?
(Points: 4)
20-year, zero coupon bond.
10-year, zero coupon bond.
20-year, 10% coupon bond.
20-year, 5% coupon bond.
1-year, 10% coupon bond.


7.
Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?
(Points: 4)
$1,046.59
$1,111.58
$1,133.40
$1,177.78
$1,189.04


8.
Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their yield to maturity?
(Points: 4)
6.87%
7.03%
7.21%
7.45%
7.61%


9. Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their current yield? (Points: 4)
7.80%
7.90%
9.00%
9.10%
9.20%


10. Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6%, based on semiannual compounding. What is the bond’s price? (Points: 4)
$1,008.65
$1,024.67
$1,051.34
$1,098.00
$1,105.78

Here's the SOLUTION

P21.3A Parsons Plumbing & Heating manufactures thermostats that it uses in several --ANSWER KEY

P21.3A Parsons Plumbing & Heating manufactures thermostats that it uses in several of its products. Management is considering whether to continue manufacturing the thermostats or to buy them from an outside source. The following information is available:

1. The company needs 80,000 thermostats per year. Thermostats can be purchased from an outside supplier at a cost of $6 per unit.

2. The cost of manufacturing thermostats is $7.50 per unit, computed as follows:

Direct materials $156,000

Direct labor 132,000

Manufacturing overhead:

Variable 168,000

Fixed 144,000

________________________________________

Total manufacturing costs $600,000

Cost per unit ($600,000 ÷ 80,000 units) $7.50

________________________________________________________________________________

3. Discontinuing the manufacture of the thermostats will eliminate all of the direct materials and direct labor costs but will eliminate only 60 percent of the variable overhead costs.

4. If the thermostats are purchased from an outside source, certain machinery used in the production process would no longer have to be leased. Accordingly, $9,200 of fixed overhead costs could be avoided. No other reductions will result from discontinuing production of the thermostats.

Instructions

a. Prepare a schedule to determine the incremental cost or benefit of buying thermostats from the outside supplier. On the basis of this schedule, would you recommend that the company manufacture thermostats or buy them from the outside source?

b. Assume that if thermostats are purchased from the outside source, the factory space previously used to produce thermostats can be used to manufacture an additional 6,000 heat-flow regulators per year. These regulators have an estimated contribution margin of $18 per unit. The manufacture of the additional heat-flow regulators would have no effect on fixed overhead. Would this new assumption change your recommendation as to whether to make or buy thermostats? In support of your conclusion, prepare a schedule showing the incremental cost or benefit of buying thermostats from the outside source and using the factory space to produce additional heat-flow regulators.

Here's the SOLUTION

Managerial Accounting- P17-5A Hy and Lowe is a public accounting firm that offeres two primary services-ANSWER KEY

Managerial Accounting (Kimmel, Weygandt, Kieso)

Chapter 17 Activity-Based Costing

P17-5A

Hy and Lowe is a public accounting firm that offeres two primary services, auditing and tax return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing acivity-based costing. The partners agree to use next year's budgeted data for purposes of analysis and comparison.

The following overhead data are collected to develop the comparison.

Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Service Audit Tax

Employee training Direct labor dollars 216,000 1,800,000 1,000,000 800,000

Typing and Secretarial No. of reports/forms 76,200 2,500 600 1,900

Computing No. of minutes 204,000 60,000 25,000 35,000

Facility rental No. of employees 142,500 40 22 18

Travel Per expense reports 81,300 Direct 56,000 25,300 720,000

Instructions:

a. Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Hy and Lowe.

b. 1. Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).

2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers.

c. Classify each of the activities as a value-added activity or a non-value added activity.

d. Comment on the comparative overhead cost for the two services under both traditional costing and ABC.

Here's the SOLUTION

Joe Laramie owns and operates Joe's Burgers-ANSWER KEY

Joe Laramie owns and operates Joe's Burgers, a small fast food store, located at the edge of City College campus in Newton, Ohio. After several very profitable years, Joe's Burgers began to have problems. Most of the problems were related to Joe's expansion of the eating area in the restaurant without corresponding increases in the food preparation area. Joe does not have the cash or financial backing to expand further. He has therefore decided to sell his business. William Sheets is interested in purchasing the business. However, he is located in another city and is unfamiliar with Newton. He has asked Joe why he is selling Joe's Burgers. Joe replies that his elderly mother requires extra care, and that his brother needs help in his manufacturing business. Both are true, but neither is his primary reason for selling. Joe reasons that William should not have asked him anyway, since profitable businesses don't come up for sale. Required: I. Identify the stakeholders in this situation. II. Did Joe act ethically in not revealing fully his reasons for selling the business? Why or why not?

Here's the SOLUTION

Budgeting and long-range planning are both important aids-ANSWER KEY

Budgeting and long-range planning are both important aids to management in achieving a company's goals and objectives. Briefly distinguish between budgeting and long-range planning, and indicate how they help managers perform their functions.

Here's the SOLUTION

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2010-ANSWER KEY

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2010, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years. What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2010, when the equity method was applied for this acquistion? (Show your work.)

The following figures came fromteh individual accounting records of these two companies as of December31,2010:
Haynes Inc. Aaron Co.
Revenues 720000 276000
Expenses 528000 144000
Investment income Not given ----
Dividends paid 100000 60000

The following figures came from the individual accounting records of these two companies as of December 31, 2011:

Revenue 840000 336000
Expenses 552000 180000
Investment income Not given ------
Dividends paid 110000 50000
Equipment 600000 360000
Retained earnings,
12/31/11 balance 960000 216000
If this combination is viewed as an acquisition what balance would Jaynes “investment in Aaron Co. account have shown on December 31 2010 when the equity method was applied.

Here's the SOLUTION

The SEC issues accounting standards in the form -ANSWER KEY

1. (TCO 1) The SEC issues accounting standards in the form of: (Points: 5) Accounting Research Bulletins. Financial Reporting Releases. Financial Accounting Standards. Financial Technical Bulletins.

2. (TCO 2) The FASB's conceptual framework's qualitative characteristics of accounting information include: (Points: 5) Historical cost. Realization. Reliability. Full disclosure.

3. (TCO 2) The conceptual framework's recognition and measurement concepts recognize which of the following as a principle, rather than an assumption? (Points: 5) Periodicity. Monetary unit. Conservatism. Full disclosure.

4. (TCO 2) The assumption that in the absence of contrary information a business entity will continue indefinitely is the: (Points: 5) Periodicity assumption. Entity assumption. Going concern assumption. Historical cost assumption.

5. (TCO 3) XYZ Corporation receives $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a: (Points: 5) Debit to investments. Credit to retained earnings. Credit to capital stock. Credit to revenue.

6. (TCO 3) Recording revenue earned, but not yet collected, from a customer is an example of: (Points: 5) A prepaid expense transaction. An unearned revenue transaction. An accrued liability transaction. An accrued receivable transaction.

7. (TCO 4) The usual difference between accounts payable and notes payable is: (Points: 5) Legally enforceable debt. Current-non-current classification. Known payment terms. Explicitly stated interest.

8. (TCO 3) Cost of goods sold is: (Points: 5) An asset account. A revenue account. An expense account. A permanent equity account.

9. (TCO 3) When a tenant makes an end-of-period adjusting entry credit to the "Prepaid rent" account: (Points: 5) (S)he usually debits cash. (S)he usually debits an expense account. (S)he debits a liability account. (S)he does none of these.

0. (TCO 5) Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and: (Points: 5) Revenue is realized. Any receivable is collected. Collection is reasonably certain. Collection is absolutely assured.

11. (TCO 5) Bert's Meat Market sells quarters and sides of beef on the installment basis. Losses on receivables are very difficult to predict, and meat products cannot be repossessed. The revenue recognition method used by Bert would be: (Points: 5) Point of sale. Installment sales. Cost recovery. Answers B and/or C is correct.

12. (TCO 5) The percentage-of-completion method is preferable to the completed contract method and should only be avoided if (Points: 5) Completion rates are certain. Profits are low. Projects are more than five years to completion. There is a lack of dependable estimates or inherent hazards cause forecasts to be doubtful.

13. (TCO 6) Today Thomas deposited $100,000 in a three-year, 12% CD that compounds quarterly. What is the maturity value of the CD? (Points: 5) $109,270. $119,410. $142,576. $309,090.

14. (TCO 6) George Jones is planning on a cruise for his 70th birthday party. He wants to know how much he should set aside at the beginning of each month at 6% interest to accumulate the sum of $4,800 in five years. He should use a table for the: (Points: 5) Future value of an ordinary annuity of 1. Future value of an annuity due of 1. Future value of 1. Present value of an annuity due of 1.

15. (TCO 7) Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should: (Points: 5) Not record sales until the right to return has expired. Record an allowance for sales returns in the year of the sale. Debit sales returns in the period of the return. Debit sales in the period of the return.

16. (TCO 7) Accounts receivable are normally reported at the: (Points: 5) Present value of future cash receipts. Current value plus accrued interest. Expected amount to be received. Current value less expected collection costs.

17. (TCO 8) In a perpetual inventory system, the cost of inventory sold is: (Points: 5) Debited to accounts receivable. Credited to cost of goods sold. Debited to cost of goods sold. Not recorded at the time.

18. (TCO 8) In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is: (Points: 5) Weighted average. Moving average. FIFO. LIFO.

19. (TCO 8) In applying LCM, market cannot be: (Points: 5) Less than net realizable value minus a normal profit margin. Net realizable value less reasonable completion and disposal costs. Greater than net realizable value reduced by an allowance for normal profit margin. Less than cost.

20. (TCO 4) Compensating balances represent: (Points: 5) Funds in a bank account that can't be spent. Balances in a payroll checking account. Accounts that are subject to bank service charges. Accounts on which banks pay interest, e.g., NOW accounts.

Here's the SOLUTION

Briefly describe why companies that use perpetual inventory systems-ANSWER KEY

Briefly describe why companies that use perpetual inventory systems must still perform physical inventories. Give three specific examples of conditions that would exist that would reduce inventory levels without management's knowledge.

Here's the SOLUTION

You have recently been hired as the assistant controller for Clayton, Inc-ANSWER KEY

You have recently been hired as the assistant controller for Clayton, Inc., a large, publicly-held manufacturing company. Your immediate superior is the controller who, in turn, is responsible to the chief financial officer. The controller has assigned you the task of preparing the year-end adjusting entry for bad debts. The allowance for uncollectibles accounts has a credit balance of $86,000 before the year-end adjustment. Your analysis indicates that an appropriate balance for the allowance account is $210,000. After showing your analysis to the controller, she tells you to adjust the allowance account to $310,000. Tactfully, you ask the controller for an explanation for the amount and she tells you "We are having a really good year. Let's bump up the allowance."

Discuss the ethical dilemma you face. Consider your options and responsibilities along with the possible consequences of any action you might take

Here's the SOLUTION

In a recent press release, Foot Locker Inc. reported that its fiscal-ANSWER KEY

In a recent press release, Foot Locker Inc. reported that its fiscal first-quarter net income fell 46% due to losses related to discontinued operations, but earnings from continuing operations jumped 19% amid a modest increase in sales. The specialty athletic retailer said net was $20 million for the quarter ended May 4, compared with net of $37 million a year earlier. The latest results included a loss of $18 million from discontinued operations. Last year, the company had earnings of $5 million, or four cents a share, from discontinued operations. Foot Locker said earnings from continuing operations were $38 million, compared with $32 million a year earlier. Discuss how Foot Locker's press release relates to its earnings quality.

Here's the SOLUTION

Accounting standard setting has been characterized as a political process-ANSWER KEY

Accounting standard setting has been characterized as a political process. Discuss this proposition giving an example

Here's the SOLUTION

Explain how management's discussion and analysis of its operations--ANSWER KEY

Explain how management's discussion and analysis of its operations and liquidity may be helpful to investors

Here's the SOLUTION

Intermediate Accounting 304 - Testbank 1-20 QUESTONS

1. (TCO 1) The FASB's standard-setting process includes, in the correct order: (Points: 5)
Exposure draft, research, discussion memorandum, SFAS.
Research, exposure draft, discussion memorandum, SFAS.
Research, discussion memorandum, exposure draft, SFAS.
Discussion memorandum, research, exposure draft, SFAS.


2. (TCO 2) - The conceptual framework's qualitative characteristic of relevance includes: (Points: 5)
Timeliness.
Verifiability.
Representational faithfulness.
Neutrality.


3. (TCO 2) The conceptual framework's recognition and measurement concepts recognize which of the following as an assumption, rather than a principle? (Points: 5)
Going concern.
Historical cost.
Full disclosure.
Realization.


4. (TCO 2) Maltec Corporation has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors. The qualitative concept improved is: (Points: 5)
Comparability.
Consistency.
Relevance.
Reliability.


5. (TCO 3) Incurring an expense for advertising on account would be recorded by: (Points: 5)
Debiting liabilities.
Crediting assets.
Debiting an expense.
Debiting assets.


6. (TCO 3) Recording revenue earned, but not yet collected, from a customer is an example of: (Points: 5)
A prepaid expense transaction.
An unearned revenue transaction.
An accrued liability transaction.
An accrued receivable transaction.


7. (TCO 4) The usual difference between accounts payable and notes payable is: (Points: 5)
Legally enforceable debt.
Current-non-current classification.
Known payment terms.
Explicitly stated interest.


8. (TCO 3) A future economic benefit owned or controlled by an entity is: (Points: 5)
A revenue.
An asset.
A liability.
A contra asset until used.


9. (TCO 3) The adjusting entry required to record accrued expenses includes: (Points: 5)
A credit to cash.
A debit to an asset.
A credit to an asset.
A credit to liability.


10. (TCO 5) Under the realization principle, revenue should not be recognized until the earnings process is deemed virtually complete and: (Points: 5)
Revenue is realized.
Any receivable is collected.
Collection is reasonably certain.
Collection is absolutely assured.


11. (TCO 5) Slick's Used Cars sells pre-owned cars on the installment basis and carries its own notes because its customers typically cannot qualify for a bank loan. Default rates tend to be high or unpredictable. However, in the event of nonpayment, Slick's can usually repossess the cars without loss. The revenue method Slick would use is the: (Points: 5)
Installment sales method.
Point of sales method.
Cost recovery method.
Answers A and/or C is correct.


12. (TCO 5) The percentage-of-completion method is preferable to the completed contract method and should only be avoided if (Points: 5)
Completion rates are certain.
Profits are low.
Projects are more than five years to completion.
There is a lack of dependable estimates or inherent hazards cause forecasts to be doubtful.


13. (TCO 6) Today Thomas deposited $100,000 in a three-year, 12% CD that compounds quarterly. What is the maturity value of the CD? (Points: 5)
$109,270.
$119,410.
$142,576.
$309,090.


14. (TCO 6) Sandra won $5,000,000 in the state lottery which she has elected to receive at the end of each month over the next thirty years. She will receive 7% interest on unpaid amounts. To determine the amount of her monthly check, she should use a table for the: (Points: 5)
Present value of an annuity of 1.
Future value of an annuity due of 1.
Present value of an ordinary annuity of 1.
Future value of an ordinary annuity of 1.


15. (TCO 7) Memorex Disks sells computer disk drives with right-of-return privileges. Returns are material and reasonably predictable. Memorex should: (Points: 5)
Not record sales until the right to return has expired.
Record an allowance for sales returns in the year of the sale.
Debit sales returns in the period of the return.
Debit sales in the period of the return.


16. (TCO 7) Accounts receivable are normally reported at the: (Points: 5)
Present value of future cash receipts.
Current value plus accrued interest.
Expected amount to be received.
Current value less expected collection costs.


17. (TCO 8) In a perpetual inventory system, the cost of inventory sold is: (Points: 5)
Debited to accounts receivable.
Credited to cost of goods sold.
Debited to cost of goods sold.
Not recorded at the time.


18. (TCO 8) During periods when costs are rising and inventory quantities are stable, ending inventory will be: (Points: 5)
Higher under LIFO than FIFO.
Lower under average cost than LIFO.
Higher under average cost than FIFO.
Higher under FIFO than LIFO.


19. (TCO 8) - An argument against the use of LCM is its lack of: (Points: 5)
Relevance.
Reliability.
Consistency.
Objectivity.


20. (TCO 4) Compensating balances represent: (Points: 5)
Funds in a bank account that can't be spent.
Balances in a payroll checking account.
Accounts that are subject to bank service charges.
Accounts on which banks pay interest, e.g., NOW accounts.

Here's the SOLUTION

E12-2 A condensed income statemeent by product line for British Beverage, Inc-ANSWER KEY

A condensed income statemeent by product line for British Beverage, Inc. indicated the following for Royal Cola for the past year: Sales 254,000 Cost of goods sold 122,000 Gross profit 132,000 Operating expenses 156,000 Loss from operations (24,000) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

a. Prepare a differential analysis report, dated March 3, 2010, for the proposed discontinuance of Royal Cola.

b. Should Royal Cola be retained? Explain.

Here's the SOLUTION

The post-closing trial balance of Chen Corporation at December 31, 2011-ANSWER KEY

The post-closing trial balance of Chen Corporation at December 31, 2011, contains
the following stockholders’ equity accounts.

Preferred Stock (15,000 shares issued) $ 750,000
Common Stock (250,000 shares issued) 2,500,000
Paid-in Capital in Excess of Par Value—Preferred 250,000
Paid-in Capital in Excess of Par Value—Common 400,000
Common Stock Dividends Distributable 250,000
Retained Earnings 902,000

A review of the accounting records reveals the following.

1. No errors have been made in recording 2011 transactions or in preparing the closing entry for net income.
2. Preferred stock is $50 par, 8%, and cumulative; 15,000 shares have been outstanding since January 1, 2010.
3. Authorized stock is 20,000 shares of preferred, 500,000 shares of common with a $10 par value.
4. The January 1 balance in Retained Earnings was $1,170,000.
5. On July 1, 20,000 shares of common stock were sold for cash at $16 per share.
6. On September 1, the company discovered an understatement error of $90,000 in computing depreciation in 2010. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.
7. A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2010.
8. On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $18.
9. Net income for the year was $495,000.
10. On December 31, 2011, the directors authorized disclosure of a $200,000 restriction of Retained earnings for plant expansion. (Use Note X.)

Instructions
(a) Reproduce the Retained Earnings account for the year.
(b) Prepare a retained earnings statement for the year.
(c) Prepare a stockholders’ equity section at December 31.
(d) Compute the earnings per share of common stock using 240,000 as the weighted-average shares outstanding for the year.
(e) Compute the allocation of the cash dividend to preferred and common stock.

Here's the SOLUTION

Auditing and Assurance Services An Integrated Approach 13th Edition by Arens, Elder Beasley 2010--TESTBANK 1-7 Questions

Auditing & Assurance Services: An Integrated Approach 13th Edition by Arens, Elder Beasley 2010

1. (TCO 6) Classify each of the audit procedures below by matching the audit procedure with the type of audit evidence. Potential Matches: 1: Observation 2: Analytical Procedure 3: Reperformance 4: Documentation 5: Physical examination Matching: Answer : Count inventory items and record the amount in the audit files. : Trace postings from the sales journal to the general ledger accounts. : Watch client employees count inventory to determine whether company procedures are being followed. : Compare vendor names and amounts on purchase invoices with entries in the purchases journal. : Review the total of repairs and maintenance for each month to determine whether any month's total was unusually large. 

2. (TCO 9) Match the terms for documents and records with the descriptions provided below. Potential Matches: 1: Bill of lading 2: Remittance advice 3: Credit memo 4: Prelisting of cash receipts 5: Sales order Matching: Answer : A schedule prepared by an independent person when cash is received. It is used to verify whether cash received was recorded and deposited at the correct amounts and on a timely basis. : A document indicating a reduction in the amount due from a customer, because of returned goods or an allowance granted. : A document prepared to initiate shipment of goods, indicating the description of the merchandise, the quantity shipped, and other relevant data. It is a written contract between the carrier and seller of the receipt and shipment of goods. : An internal document for communicating the description, quantity, and related information for goods ordered by a customer. This is frequently used to indicate credit approval and authorization for shipment. : A document that accompanies the sales invoice mailed to the customer, which can be returned to the seller with the cash payment. 

3. (TCO 4) Distinguish between what is meant by business failure and audit failure.

4. (TCO 2) Discuss each of the three broad categories (types) of operational audits. 

5. (TCO 3) List and briefly describe examples of risk factors for each condition of fraud for misappropriation of assets. 

6. (TCO 7) The reliability of evidence refers to the degree to which evidence is considered believable or trustworthy. There are five factors that affect the reliability of audit evidence. One factor is the independence of the provider (evidence obtained from a source outside the client company is more reliable than that obtained within). Identify and discuss the remaining four factors that affect the reliability of evidence. 

7. (TCO 3) Melissa Barry, CPA, is the auditor of Audio Video, Inc. Audio Video has not paid Melissa's audit fee for the past two years. Melissa is working on this year's audit of Audit Video. Determine whether Rule 101 - Independence - of the AICPA's Code of Professional Conduct, has been violated. Briefly explain why the situation violates, or does not violate the code.

Here's the SOLUTION